FTC Accuses T-Mobile USA of Profiting From Phony Service Charges

Source: T-Mobile.

The Federal Trade Commission has filed a complaint against T-Mobile USA (NYSE: TMUS  ) , accusing the mobile phone company of knowingly profiting from charges for services which were never authorized by T-Mobile users, even when the company should have seen obvious signs of a sham.

The complaint, filed with the U.S. District Court for the Western District of Washington, argues that T-Mobile has often charged $9.99 per month for services the users never ordered, didn't need, and should not be liable for. These fees have been hidden in plain sight, the FTC alleges, listed on the first page of monthly bills as an anonymous "usage charge." Near the end of the often lengthy bills, users would find details on "premium services" such as "8888906150BrnStorm23918," the FTC said, with few hints of what these premium services might actually entail.

Most of these fees were passed on to third-party service providers, who allegedly rarely provided any actual services. T-Mobile would keep 35% to 40% of these fees as profit, adding up to "hundreds of millions of dollars" over several years, the FTC said. This practice, known as "cramming" in the industry, has been a target of FTC crackdowns since 2012.

The FTC said the third-party content that customers were wrongly charged for included monthly subscriptions for ringtones, wallpaper, horoscope texts, flirting tips, and celebrity gossip.

"Consumers have suffered and will continue to suffer substantial injury as a result of Defendant's violations of the FTC Act," the Commission wrote.

The FTC asks the Court to stop T-Mobile's knowing involvement in these scams, return the spurious charges to affected T-Mobile users, and add punitive damages on top. "The FTC's goal is to ensure that T-Mobile repays all its customers for these crammed charges," said FTC Chairwoman Edith Ramirez in a press release.

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Anders Bylund

Anders Bylund is a Foolish Technology and Entertainment Specialist. Where the two markets intersect, you'll find his wheelhouse. He has been an official Fool since 2006 but a jester all his life.

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9/4/2015 4:00 PM
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